Waterstones in buy-out talks

Hedge fund Elliot Advisors has exclusivity period to agree a deal as toys and games help push bookseller to 82% profit growth

Waterstones has entered talks with activist hedge fund company Elliot Advisors, one of a small number of bidders in the frame for a possible takeover.

According to Sky News, the High Street chain has granted Elliot Investors – which took Game Digital on to the stock market four years ago – a period of exclusivity to agree on a deal before it is opened to the wider market.

It was revealed last October that Alexander Mamut, the Russian billionaire who bought Waterstones from HMV in 2011, was considering selling the company for £250million, however, sources now state the asking price may now be significantly lower.

In 2016, Waterstones made its first pre-tax profit since 2011 at £9.8m, and the latest financial figures for the year to 29 April, 2017, showed an 82 per cent jump in profits to £18m, with toys, gifts, stationery and greetings cards proving a hit with customers and now accounting for more than 10 per cent of sales.

The group now trade from 274 stores and have plans for 15 more this year.

In November the retailers’ MD James Daunt said: “It’s certainly the right moment for him to sell us, (if you follow) the logic of turning a business round and making it profitable, demonstrating that that’s sustainable, then selling it.

“We are a nice business. We make good money. We’re relatively insulated from the wider retail economy because book buyers tend to continue to buy books even if they stop buying washing machines.

“If you’re interested in retail assets in the UK, we’re a pretty attractive one, and obviously we’re growing. We’ve got a very strong position within the market. It makes good sense that somebody should buy us.”